Essential trends for SMEs in 2023: The 3Rs (Reward, Retention and Recruitment)

 

Our expert People Directors take a look at the critical areas of focus for SMEs wanting to sustain growth, and explain how strategic HR management can support them in their ambitions. 

There is no shortage of advice for companies on how to become a great place to work and beat the (very tight!) labour market without breaking the bank. However, once you read past the attention-grabbing headlines, you realise these best practices and examples are based on large, global companies that do not resemble your business.  

The research and literature of HR consulting firms rarely consider SMEs, so we’ve taken the learning from those reports, added our experience of working with companies of different sizes and sectors, and explain how to apply the latest thinking within your company.  

What are the crucial HR trends that growing SMEs need to know about right now? 

The three key people priorities are:    

• Retention through development: skills-based development, as well as personal and professional, is needed to retain your best people 
• Reward: how individualised benefits and choice will elevate the employee experience  
• Recruitment: the ability to attract the best talent 

The three Rs – recruitment, retention and reward – are all interlinked and SMEs require a linked up approach to successfully deliver all three to maximum advantage. While we could (and almost certainly will at a later date) talk extensively about each one, we’d like to keep things practical.  

So, one subject at a time, we’d like to drill down into each topic in a bit more detail.

1. Retention: skills development for retention

“If linked with a business project or task, skills development becomes an investment that can be measured against business results and the retention of participating staff.”  

Business owners rarely write a job description for their first few collaborators. Employees wear multiple hats and re-invent themselves in response to business requirements, i.e. what needs doing first and who can do it. This is where your business can still beat larger companies – by returning to your entrepreneurial roots (with some guiding principles).  

It’s also what business consultants have been talking about a lot over the past year or so. A recent blog from Deloitte states that: ”Skills-based organisations shift from understanding the unit of work in terms of fixed, static jobs, to reimaging it in terms of a dynamic landscape of skills that can be nimbly deployed to work as it continuously evolves.” Gartner calls it “quiet hiring” and HR analyst Josh Bersin reckons that “every company will get serious and pragmatic about skills.” 

It’s not just the experts – according to Statista, 38% of surveyed HR executives identified “accelerate reskilling” as a key priority in the event of an economic downturn.  

So how can this work for SMEs?  

We advise identifying 3-5 skills critical to the continued success of your business. Align these with genuine, business-stretch projects where your employees can get involved. Reward their achievements of learning new skills through public recognition of their contribution.

If linked with a business project or task, skills development becomes an investment that can be measured against business results and the retention of participating staff. You could also count your investment amount in the cost of the project, rather than from a generic ‘learning and development’ budget.  

Your biggest hurdle to kicking off these projects, aside from cost, will be your own line managers worried about losing capacity within their teams, or that the additional skills will make their employees more marketable elsewhere. To overcome this hurdle, start with one or two open-minded line managers, maybe those who are increasingly worried of retaining their top talent. Focus on creating one or two positive examples of these projects and skills-building in practice.  

It’s important that you start with a short-term project that can be achieved in say, 90 days. For example, you might develop an internal expert on AI content generation tools like ChatBot for your content marketing initiatives. Remember that the success of this approach to building skills will depend on the success of the business project that supports it.  

Remember that, while yes, there may be a risk of making your people more employable by helping them to develop their skills; but if you don’t help them develop and recognise their learnings, you’re likely to lose them anyway. They are more likely to stay if you continue to create opportunities for learning and development – and wouldn’t you rather retain and engage the people you already have, with an upskilled capacity, than risk losing them altogether? 

 2. Reward: individualised employee benefits 

“Now, employee well-being is less about beanbags, video games and yoga classes and more about direct and individualised sources of physical, mental and financial well-being.”  

Do you feel like you have not been able to catch a breath in recent years? You’re not alone – and your employees will also feel that burden. The last few years have proved that one shock can come quickly after the previous one is barely over.  

In 2023, employee well-being has been heavily influenced by the continuing increase in the cost of living. This comes on top of the concerns of 2022, which focused on mental health issues, and 2020 and 2021 which focused on physical health.  

Now, employee well-being is less about beanbags, video games and yoga classes and more about direct and individualised sources of physical, mental and financial well-being. Discount vouchers for grocery shops, days of rest to combat burnout or flexible hours to adapt to family life in a hybrid work environment are what makes the most difference to employees now.  

So what should you offer and how do you individualise your approach? Let’s start with physical health. Although the pandemic feels like it is past us, the legacy issues with healthcare continue to affect employees. Identify three to five options for physical health from which employees can select just one, based on their own current life stage/personal needs.  

You may be concerned that everyone will choose the more expensive private medical coverage option. However, by choosing just one, your employees are attributing a value to each of the benefits and deciding whether they’ll use it. Ask them to re-commit the following year. If they have derived value from their choice, they will take the same benefit. If they have not used it they may change to a different health benefit which may be of lower cost to your company.   

The value in this exercise is the individual choice, which is the absolutely critical, overarching trend for 2023. With that choice comes commitment and utilisation of the benefit. This in turn translates into value for your company and the employee. You’ll also stop subsidising gym memberships that never get used!  

Repeat this exercise for mental well-being. Again, identify three to five options, allow employees to select one based on their needs and ask to re-commit after 12 months.  

Finally, identify your financial well-being options. This shouldn’t impact your reward and payroll – keep those as separate investments. The options you could offer here are discount vouchers, help with childcare costs, additional time off, financial management coaching or any benefit that has an impact on the employee’s everyday financial health.  

These individualised benefits will go a long way to re-energise your employees. A tailored approach will be perceived as genuine care and respect, which translates into loyalty and commitment.  

Employee well-being is at the start of the employee experience. Unless you can unlock your employees from the demands of their physical, mental and financial health, all other efforts in 2023 to improving the employee experience will have very poor return on investment.  

3. Recruitment: maintain ability to attract talent  

“Be wary of dismantling all your recruitment processes in case you need to re-start quickly when results turn positive.”  

In the face of the rising cost of living and uncertain economic prospects, hiring new talent has dropped significantly as a priority. However, be wary of dismantling all your recruitment processes in case you need to re-start quickly when results turn positive.  

Before letting the axe fall on your recruitment spend, look at your annual staff turnover for the last three years. Unless you are explicitly shrinking your business, you will likely need to replace a share of your workforce in the next 12 months (and have a budget for it). This budget could reduce to 20-50% of your current spend, but no less than that.  

In the meantime, reassign any employees involved in recruitment to another value-adding project. For example, employees who have been generating candidate leads and talking to prospective employees may find success in sales and lead generation for your products and services. You could make this a temporary assignment and include it as part of their progression and development with the company (see above).  

According to Statista, 48% of surveyed HR executives identified ‘Increase use of variable staffing models’ as a key priority in the event of an economic downturn versus only 23% selecting ‘Reduce headcount’.  

If you can afford the investment, this is a good time to build your employer brand via your external communications, even if you have no roles to offer right now. Your messaging does not have to refer to specific vacancies, it’s about creating brand awareness while other companies are in a hiring freeze or even laying off staff. When markets heat up again, your company will be top of potential employees’ minds.

• Cost management: Ask your finance team to identify if you have any of these HR-related fixed/monthly charges:  

Job boards: cancel posts if not currently advertising or reduce number of postings to minimum required.   

LinkedIn recruiter and other candidate search tools: cancel membership until you specifically need to target candidates, or suggest a three-month freeze on your fees.  

ATS (applicant tracking software) fees: review your contract and identify if there are any reductions in monthly fees or number of users/licenses.  

• Unlocking the full potential of your people 

Engagement, productivity and continuing development are all incredibly important in every business workforce, but achieving it is never simple. Often, and especially in SMEs, business leaders are so busy managing the day-to-day, there is less scope for focus on strategic HR management and people planning. Yet the impact of not investing enough in a people strategy can derail even the most successful business.  

By focusing on recruitment, retention and reward, we know from our collective (and extensive) experience, SMEs can ignite their people and improve in all these areas. It isn’t easy, but it is entirely achievable – and we are here to support you.  

If you’d like to maximise or develop new skills in your business, tailor a staff benefits package or increase your talent attraction capability, why not bring in a part time HR Director into your business and develop a people strategy that can help to realise any or all of those ambitions? call 0345 646 5201 to find out more.